While a post-pandemic burst of inflation has abated across much of the developed world, the UK is still stuck with the highest price growth among big Western economies.

UK inflation rose unexpectedly in July, led by energy and airfares, but core pressures remain nuanced. Markets signal BoE may pause in September.

The Bank of England currently expects inflation to hit 4% in September, the all-important month for pensioners. Wage growth is currently slightly higher than this at 4.6% (including bonuses), although it could shift slightly in next month's report.

UK inflation rose to 3.8 per cent in July, up from 3.6 per cent in June, keeping the rate stuck at its highest level since January.

The U.K.’s annual inflation rate was higher than expected at 3.8% in July, according to data released by the Office for National Statistics (ONS) on Wednesday. Most economists had anticipated inflation would reach 3.

Transport was the biggest factor driving up overall inflation in July, particularly due to a spike in flight prices as families booked summer holidays. | ITV National News

The collection window for last month’s figures was “on or around 15 July”, while school summer holidays in England began on 23 July (eight days later) this year. Last year, collection was “on or around 9 July”, while schools broke up on 25 July (sixteen days later).

Gilts broke out of a week-long slide on Wednesday, surging despite a hot inflation number that threatens to slow the pace of interest rate cuts by the Bank of England.